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'The market is paying Tesla to take capital': Credit Suisse analyst

Ines Ferré
·Markets Reporter
·2 min read

Tesla (TSLA) shares are trading lower on Monday, breaking their 11-day winning streak on Monday despite some Wall Street price target increases on the electric vehicle maker.

Over the weekend Chinese search giant Baidu (BIDU) announced it will create an EV company via a partnership with Zhejiang Geely. Tesla competitor NIO (NIO) also unveiled its new sedan with a powerful battery pack over the weekend.

Credit Suisse analyst Dan Levy doubled his price target on Tesla to $800 from $400 based on “solid margins” and the company’s ability to raise capital amid its massive rally last year.

“With Tesla raising $12bn in ‘20 and not seeing a dent in the stock, it implies Tesla’s cost of capital is negative – the market is paying Tesla to take capital,” wrote Levy in a note to investors.

“This is a significant advantage vs. other automakers, and Tesla has the funds to expand capacity as much as it desires,” he added.

He also noted “significant progress in margin, showing Tesla has further opportunity to cut cost and thus unlock lower pricepoints.”

JANUARY 8th 2021: Elon Musk - CEO of Tesla, Inc. and CTO and chief designer of SpaceX - is now the richest person in the world, passing Amazon CEO Jeff Bezos. - File Photo by: zz/STRF/STAR MAX/IPx 2020 8/14/20 The Tesla Automobile dealership in Downtown Manhattan, New York City. (NYC)
JANUARY 8th 2021: Elon Musk - CEO of Tesla, Inc. and CTO and chief designer of SpaceX - is now the richest person in the world, passing Amazon CEO Jeff Bezos. - File Photo by: zz/STRF/STAR MAX/IPx 2020 8/14/20 The Tesla Automobile dealership in Downtown Manhattan, New York City. (NYC)

BofA analyst John Murphy also raised its price target on Tesla to $900 from $500, maintaining a Neutral rating on the stock.

He highlighted “the higher the upward spiral of Tesla's stock goes, the cheaper capital becomes to fund growth, which is then rewarded by investors with a higher stock price.”

Tesla’s stock is down as much as 6% in early trading following a 40% rally over the last 30 days. Last week Tesla CEO Elon Musk become the richest person in the world, surpassing Amazon’s Jeff Bezos.

Shares soared more than 740% last year after strong deliveries, back-to-back quarters of profitability, and inclusion in the S&P 500.

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Ines covers the U.S. stock market. Follow her on Twitter at @ines_ferre

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